China drafts new antitrust guideline to rein in tech giants, wiping US$102 billion from Alibaba, Tencent and Meituan stocks
- Draft guideline ‘targeting tech giants’ in e-commerce, online food delivery and ride hailing, Atta Capital’s Alan Li says
- Tech giants plunge broadly in Hong Kong trading on Tuesday, with Meituan and JD.com both down by more than 8 per cent
China has released a draft antitrust guideline to rein in internet-based monopolies, signalling policymakers’ heightened concerns over the growing power, influence and risks of digital platforms and their market practices in the economy. The move immediately erased about US$102 billion of market value from Alibaba Group Holding, Tencent Holdings and Meituan.
“The policy is clearly targeting the tech giants, with e-commerce, online food delivery and ride hailing platforms likely to receive the biggest blow because of how concentrated these sectors are,” said Alan Li, portfolio manager at Atta Capital in Hong Kong. “This is probably just the first warning shot.”
The guideline also deems activities like platforms offering steep discounts to eliminate rivalry, colluding on sharing sensitive consumer data, and forming alliances to force out competitors, as potentially monopolistic.
Chinese internet giants widened their losses through Tuesday trading in Hong Kong, after their American depositary shares tumbled in New York. Alibaba, operator of China’s largest e-commerce platform and owner of this newspaper, fell 5.1 per cent to HK$275.40, after sliding 3.1 per cent overnight. Tencent, which runs the country’s most popular messaging app, retreated 4.4 per cent to HK$595. Online food delivery giant Meituan dived 10.5 per cent to HK$300.
The slump erased HK$790 billion (US$101.9 billion) of market capitalisation from the trio popularly known as the ATM stocks, according to Bloomberg data. JD.com lost 8.8 per cent to HK$330.40, wiping HK$100 billion from its market value.
A representative of Alibaba declined to comment on this topic. JD.com, Tencent and Meituan did not immediately reply to requests for comment.
The new draft guideline is the first clear sign that Beijing is seeking to curtail the expanding prowess of its home-grown tech champions, analysts said, as they provoked increasing controversies in recent years regarding their labour and market practices.
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How big are China's tech giants?
Alibaba and Meituan have significantly shaped people’s daily lives in China over the past decade – an estimated 400 million people in the nation now order food delivery from their smartphones and 855 million shop online, according to Daxue Consulting and McKinsey & Co.
“The draft rules appear to be harsh since a big number of practices are defined as monopolistic, such as exclusivity agreements that prevent vendors from selling goods on rival platforms,” said Gong Zhenhua, a partner with Shanghai Ronghe Law Firm. “Though the regulator did not release details of punishments on the wrongdoings, it can be expected that those players that fail to comply with the rules under tight regulatory oversight will pay a high price for the practices.”
Wang Xuliang, owner of a restaurant in Shanghai which uses several food delivery service platforms to cater to customers who opt not to dine out, said the new rules could benefit small shops like his because they have no bargaining power on fees charged by the internet giants now.
“Profit margin of our businesses is thin, and we want the platforms to lower the fees to help us shore up profitability a little bit,” he said. “But the platforms are essentially needed by us to promote business. We just hope that they can sacrifice some profits to support us.”
